Friday, October 05, 2007

The RIAA's Jury Verdict

There have been a number of stories about yesterday's jury verdict in Minnesota, awarding $220,000 in statutory damages. The best reporting I have seen so far is by Declan McCullagh at CNet.com, here. As he points out, there were some key factual issues and key jury instructions. On the facts, there was a match between a username, an email address, and an IP address. Here are two critical jury instructions:

JURY INSTRUCTION NO. 15: The act of making copyrighted sound recordings available for electronic distribution on a peer-to-peer network, without license from the copyright owners, violates the copyright owners' exclusive right of distribution, regardless of whether actual distribution has been shown.

The making available instruction is obviously of great importance.

I have read stories in which people have questioned the amount of damages, which is a bit more than $9,166 per work and well within the non-willfulness range. I would be stunned if there is any room for overturning the award. There is serious doubt that any award within the permissible range, even the tippy-top, is subject to review. I think there may well be cases where a damage award may be constitutionally flawed, but this is not one of them. This is not to say I think the jury should have awarded anything above the minimum after finding liability, but it is to say the jury was free to award that amount and even a more without review, and especially given the vastly larger number of works for which there was

You know, even as an IP lawyer, I really wonder if you're right about the $9.8k per instance being justifiable. Frankly, and maybe I'm not creative enough, but I wonder where else a 9000-10000x actual damages award would be considered constitutionally reasonable. Especially against someone not involved in massive criminal type infringement.

Moreoever, I am actually somewhat shocked that you'd even think that that was an appropriate remedy.

Part of my problem, I think, is that the law doesn't distinguish between the types of creative works. In this case we have 24 instances of individual songs (not even albums) being "made available." (leaving aside the validity of that claim) However, it's treated the same way that 24 copies of the entire albums, 24 full length original movies, 24 copies of million dollar software programs, thousands of instances of shop-lifting those albums (note that I believe Minnesota treats multiple things shoplifted in a single instance as a single instance of shop-lifting), etc.

That last point is peculiar since where there is no actual tangible loss we treat the defendant thousands of times more harshly than if they were to actually steal the CDs themselves.

What's the incentive we're creating? Go shoplift because if you get sued you're going to be in better shape than if you download music?

That's a very peculiar policy, and one, in fact, I find hard to swallow.

I didn't mean to suggest the award was appropriate. I said I would have awarded the minimum ($750) per work if liability was found. What I was saying is that regardless of what either of us would deem appropriate, it was the jury's charge to fix the amount it found appropriate, and it did. They could have gone up to $30,000 for nonwillful, so $9,250 is well within the limits set by Congress; and that's the key: courts have approached the issue in the past in this way: Congress has already determined that $30,000 per work is appropriate, so we can't second guess that. There is Supreme Court precedent under the 1909 Act right on point. I do think that the court has moved more toward being willing to examine punitive damages for their constitutionality, so that in this case if 2,000 works had been at issue and the jury had awarded $150,000 per work, we would have a very different situation; one I should note is by no means easy, quite the contrary.

I didn't mean to suggest the award was appropriate. I said I would have awarded the minimum ($750) per work if liability was found. What I was saying is that regardless of what either of us would deem appropriate...

But I think that only reinforces the point that the statutory damage amounts are so high as to violate the notice requirements which THIS supreme court has used to strike punitive damage awards in the past. I realize that if you're willing to argue that the court is simply pro-business rather than pro-notice, they could easily rule the other way in this case if a challenge is brought.

But this is a case where the iTunes music store has given us a clear example at the very highest end of what the actual value of one digital copy of a pop song is worth. For those of you unfamiliar with iTunes, most songs cost $0.99 each. It is still possible to download songs from the russian allofmp3.com website for much cheaper than that, but the buck-a-song price is good enough for our purposes.

If you can download a song from apple for a buck, why should the statutory damages for uploading that song be, at a minimum, seven hundred times higher? Or, in this case, nine THOUSAND times higher? There is no rational basis for the ratio of actual damages to the statutory penalty.

I would love to know what evidence the jury considered. There are though in other statutes, especially criminal ones, mandatory minimums that are set across a broad range of activity and which in given cases may be too harsh.

There is soo much to be desired about knowing the jury deliberations here...Wired's coverage (http://blog.wired.com/27bstroke6/2007/10/jury-deliberati.html) contains links to the instructions and jury verdict questions. The jury verdict questions ask for a finding of infringement, but not under which instruction, the straightforward reproduction instruction, or the controversial 'making available' aspect of the distribution instruction. Appealing a wrongful instruction in light of such nebulous jury findings of fact can't be easy.

You might conclude that Beryl manufactured the copy, since at the end of the copying, Albert has his same copy and Beryl has a new one.

Alternatively, you might conclude that Albert manufactures copies of pieces of the file and communicates those pieces along the wire for Beryl to reconstruct and assemble.

Perhaps they both engage in copying?Perhaps Beryl commissions and induces Albert?Perhaps Albert advertises his willingness to collaborate in the free manufacture of copies and thus induces Beryl?

The juries might not be concerned, but if only one person is culpable then with 200 grand at stake one would assume care would be taken to ensure it was paid by the correct culprit. If two or more people are involved, then all would be located and the damages shared.

Infringement has occurred and someone has to pay - we don't care who - and they have to pay big.

No damage has occurred. Published information has been communicated between Albert and Beryl. Two insignificant citizens ignoring a publishing corporation's multi-million dollar monopoly - supposedly created to benefit the very same citizens.

Will this be the first of many such cases? Or is this the straw that wakes the camel from its slumber?

Would you send a shock of 450V into a subject simply because someone in authority said that it was required by the experiment?

Copyright is such a Milgram experiment. The penalties are now at an extreme level. The victims, strangers in another room. The publishing authorities by your side are emphatic that it is important the experiment continue.

The dial is turned up to $450,000.

Most will be concerned, but most will continue to award those damages no matter how otherwise upstanding the citizen is that appears before them.

I found instruction 15 curious. It basically tells the jury the defendant is guilty even if there is no direct proof of violation. The jury really had no choice but to rule guilty and determine a dollar amount.

The big open issue which SCOTUS has yet to really address is whether its punitive damages jurisprudence is applicable to Congressionally established statutory damages of any kind.

If statutory damages are merely punitive damages by another name then the copyright act is clearly unconstitutional as applied in this case, because we have a market that clearly establishes the market value of a song download, and the actual to statutory damages ratio is far outside the realm of what SCOTUS has held to be acceptable in the context of punitive damages awards.

Cooper Industries has implicitly called into question stale precedents on Copyright statutory damages.

Also, the 8th Amendment, is by its nature, as SCOTUS has recently acknowledge in the death penalty cases, a product of evolving cultural norms. Furthermore, if any area of law has seen technological developments that justify deviations from stare decisis principles, the digital copyrights have to fit the bill.

If statutory damages are merely punitive damages by another name then the copyright act is clearly unconstitutional as applied in this case. . .

This is the crux of the question that remains.

If statutory damages are not held to be the same as punitive damages, then our esteemed Blogfather must be correct in his analysis that the $9250 is presumptively constitutional.

Given rational basis as the standard of review for the Copyright Act and/or the DMCA, deterrance of infringing activities through creation of statutory penalties for violation is presumably a legitimate exercise of Congress's power under the commerce clause.

If the court agrees with that interpretation, the 8th amendment argument fails becuase ignorance of the law is not an excuse.

Considering that distributed p2p was designed in part to create just this proof problem, would there ever be a situation where the accused wasn't home reading the Bible at the time the infringement occured?

Should the defendant be believed if the defendant admits everything connecting her to the infringement--but at just that moment of infringement, zombies took over the computer?

Should the defendant be believed if she claims identity theft--never reported, and only used for the purpose of downloading the very infringing files at issue in the case?

I think that the court was right on the "making available" issue, and the person who convinced me of this was Jammie Thomas' lawyer when he was interviewed on CNN. He said that if they win their appeal, then the RIAA would have to prove that her files were downloaded by someone other than the RIAA's agents. That was what got my mental gears turning. Why would it have to be someone other than the RIAA's agent? Distribution is distribution and there is no logical reason why the plaintiff can't show distribution by being on the receiving end of the distribution chain. But then what's the juncture that I realized that the requirement for anyone downloading the songs is clearly requiring an unnecessary act. If the RIAA can find the songs being offered for download, then they and anyone else could download them at will. And if that isn't distribution, I don't know what is. Let's look at an analogy: suppose I decide to publish a copyright treatise that copies your treatise verbatim and I open a web site and offer my treatise for sale for $1.00. I'm not commenting, critiquing or doing anything that could remotely be construed as fair use -- I'm simply offering to sell copies of your copyrighted work with my name on it. But due to my own incompetence, my site gets next to no traffic and no one actually buys the treatise. Clearly, I've breached your copyright merely be offering it for sale even if I'm too inept to get anyone to actually purchase it. And surely you shouldn't have to wait until an independent third party comes along and buys it in order to sue me. And I think that there is precedent for this. If a movie studio finds some guy on the street with pirate DVD's, the mere fact that he has a card table full of infringing material being offered for sale is enough to get him busted, isn't it? And if a burglar breaks into my house, takes nothing for himself but merely throws open the front door and puts up a sign in my front yard telling the world to "come and take what you want," is he any less guilty if no one takes him up on the offer?

Statutory damages are not an analog for punitive damages. They are intended as a replacement for actual damages where actual damages can't be accurately measured.

This view of statutory damages as a form of liquidated damages only makes sense in contexts where actual damages can't be accurately measured. Now, it is easy to determine actual damages as it is to get a stock quote. The market in precisely the works at issue is now deep and broad.

It would certainly be easy establish a test distinguishing between punitive and compensatory statutory damages similar to existing law distinguishing between valid liquidated damages clauses in contracts and forfeitures. Such an analysis might uphold statutory damages for unpublished works or works where there is individualized negotiation of royalties (e.g. the "big rights" to use music in a motion picture, as opposed to the "little rights" to play them on the radio and sell CDs), while striking it down, e.g., for songs sold on iTunes or in record stores where there is an established generally available market price that can be determined with certainty.

Also, even under such a regime, statutory damages often wouldn't be unconstitutionally punitive as applied. For example, a statutory damage award for $9,500 involving a copy of specialty CAD computer program that sells for $2,000 a pop would likely not be unconstitutional. And, in the absence of credible evidence of actual value, a Congressional statute not void on its face would be presumed constitutional.

You're missing the point, though it does relate to Bill's "making available" issue. It isn't the just the market price of the copyrighted work that is at issue, but the number of infringing copies that needs to be made liquid. The statute says that the amount of statutory damages applies to "all infringements involved in the action, with respect to any one work." Thus the award of statutory damages includes a guestimate of the scope of the infringement, not just the market value of the underlying work.

Moreover, there is a really strong argument that the main part of the scheme can't be punitive. That's because the law raises the cap for willful infringement, which can reasonable be interpreted to mean that the portion of a statutory damage award under $30,000 is, ipsp facto, compensatory and not punitive. This wouldn't help Jammie to much as she is well under even the $30,000 cap.

You ask "Why would it have to be someone other than the RIAA's agent?" The answer is that the RIAA is the copyright owner - and it is the RIAA can therefore make as many copies as it wants. The defendant here bought a CD, copied it to her computer, put it in a shared music folder, and then the copyright owner copied it from that folder. If that is the only fact, it is not infringement - as the statute specifically requires that the distribution be without the consent of the copyright owner. The copyright owner clearly consents if it is the one doing the distribution.

The statute does not forbid "offering for sale" (as, for instance, the Patent Act does). Likewise, the statute does not forbid "trying" to infringe.

The two main problems with your analogy are: (i) you have made an unauthorized copy of the treatise, thereby infringing the copyright; and (ii) others (albeit a small group) have made unauthorized copies of the treatise.

Taking these in order - in this lawsuit, the defendant did not illegally copy the songs. There was no such allegation. In you analogy you have made an illegal copy of the treatise. Likewise, the DVD street salesmen have made illegal copies of the DVDs. Those are acts of infringement, clearly proscribed by the Copyright Act.

Turning to the second problem - again, unlike your analogy where the distribution is small, in this case there was not even a small group that copied the songs - rather, the evidence did not show that anyone illegally copied the songs. To the contrary, the only ones that copied the songs were those that were authorized to do so by the copyright owners (i.e. the RIAA).

As I read the Copyright Act, there is no proscription against making a copyrighted work available for copying.

The RIAA bears the burden of proof of demonstrating copyright infringement. To prove copyright infringement, the RIAA had to prove ownership of the copyrights AND illegal copying.

Under the paradigm set up here, and which you seem to have endorsed, the burden of proof has shifted. Rather than the RIAA demonstrating illegal copying (even by circumstantial evidence), the defendant was required to demonstrate that no one copied the songs. This is a burden that is very difficult - if not impossible - to meet.

I am pro-copyright and pro-protection. I think that illegal file sharing has had a negative impact and should be disuaded. But until the Copyright Act is altered, the copyright owner still has the burden of proof to demonstrate distribution, and an offer to distribute, without more, does not equate to such proof.

Correct me if I'm wrong, but isn't an essential element of the Zombie Defense that the copyright owner would have to disprove the theory that zombies made her do it? Does any of this making available argumentation have any relevance if the defendant can successfully show that the plaintiffs have not disproven the existence of zombies? So doesn't it then make sense to engage paranormal investegators as early in the case as possible?

I am in absolute agreement with your earlier statements regarding common jury instruction practice, Mr. Patry. I would humbly suggest, however, that in light of the highly contentious nature of one of the instructions, smart legal and judicial practice in this case would have been to request or craft a jury instruction sheet that made such specific findings of fact. Its aid to subsequent appelate practice and even post-verdict motions would be immense, I would think. Monday-morning quarterbacking is always easier, but is anyone aware of any reason an instruction eliciting specific findings could not have been given?

Paltry said "I have read stories in which people have questioned the amount of damages, which is a bit more than $9,166 per work and well within the non-willfulness range."

When I look at the Jury Special Verdict Form it looks to me like all the cases of infringement found were WILLFUL. So you should have said "well below the max $150,000 willful range" or something like that. Or I'm missing something?

Here is the link I found http://www.muddlawoffices.com/RIAA/Virgin%20Thomas/100%20Special%20Verdict%20Form.pdf

Aside from misspelling my name, there are many cases where a jury or court finds willful infringement but awards damages below the $30,000 threshold for awarding damages based solely on a willfulness finding, MP3.com being a very famous one, where the damages were $25,000. This only proves that the two concepts of the amount of statutory damages and a finding of willfulness aren't the same.

Paltry, we are aware that the jury can go up to $150K per doesn't mean they can't go below 30K. The point we were unable to make though is that it is more compelling in terms of arguing jury reasonableness to note that the roughly 9K per was below the $150K they could have awarded than to say it was less than the $30K for non-willful. Thank you for your reply and for permitting our comment.

We find your blog very informative and congratulate you on publishing your tome.

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This is a personal blog, not a Google blog. It is about my book Moral Panics and the Copyright Wars, published by Oxford University Press. Please don't attribute anything in the blog or the book to Google, which employs me.